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Featured Articles
In Conversation: Three Venable Tax Attorneys Discuss the Rise in Demand for Corporate Restructuring Services
Over the past few years, amid rising instability, more and more organizations are opting to restructure their businesses. In this Q&A, key members of Venable's San Francisco-based Tax Group—Becca Chappell, Susan Keeler, and Friedemann Thomma—discuss some of the reasons for this increased demand and how their team draws on their substantial experience as both legal and business advisors to help clients undergoing restructuring to minimize their tax burden.
Earnouts and Their Tax Treatment
As buyers and sellers engage in negotiations for the sale of a business, often there may be disagreements as to the value and expected growth of that business. One party might currently value the business higher than the other party does, or there may be economic uncertainty regarding the future performance of the business. These differing expectations are usually resolved through an earnout. An earnout is a contractual arrangement that allows the buyer to pay the seller a portion of the purchase price at a later date, contingent upon the target business achieving certain performance goals. In other words, the seller must "earn" the remainder of the purchase price, based upon the healthy financial performance of the target business.
Related Articles
Annual Stockholders Meeting: Preparation Guide
We often assist clients with preparation for annual meetings of stockholders. A variety of materials provide guidance on the major components of an annual meeting, such as proxy statement disclosures and board approvals, including our memorandum, Proxy Materials and Annual Meetings under Maryland Law - 2024. However, fewer resources exist for preparing the items necessary for the conduct of stockholder meetings. This brief guide is intended to serve as a reminder of certain items that should be included in the preparation for annual meetings.
Federal Efforts to Incentivize States to Promulgate False Claims Statutes
The federal False Claims Act (FCA) is widely regarded as a powerful tool to punish fraud against the federal government. Since 1986, the federal government has recovered more than $75 billion from FCA settlements and adjudications. Enforcement tools that are often overlooked, however, are state false claims statutes.
Alabama Federal District Court Declares CTA Unconstitutional: Here's What You Need to Know
The Corporate Transparency Act (CTA), which became effective on January 1, 2024, was enacted to combat the use of shell companies by those seeking to evade anti-money laundering laws and economic sanctions. The CTA imposes an obligation on many U.S. entities (and foreign entities doing business in the United States), unless exempted, to report to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury, information of their beneficial owners and, for entities formed on or after January 1, 2024, information of "company applicants" who create or register them. The penalties for noncompliance range from civil fines to criminal penalties, including imprisonment.
Fiduciary Liability Limitations Under Nevada Law Trigger Entire Fairness Review of Conversion from Delaware Due to Controlling Stockholder
The Delaware Court of Chancery, in Palkon v. Maffei, et al., C.A. No. 2023-0449-JTL (Del. Ch. Feb. 20, 2024), determined that a reduction in the liability exposure of a fiduciary due to the conversion of a Delaware corporation to a Nevada corporation, which conversion is approved by a controlling stockholder, will subject the conversion to the entire fairness standard of review absent the "twin MFW protections" required to obtain business judgment review (i.e., approval of an independent, adequately empowered special committee that fulfills its duty of care, and the uncoerced, informed vote of a majority of the minority stockholders).
Fauquier County's Board Implements New Data Center Development Policy Guidance
On December 14, 2023, the Fauquier County Board of Supervisors adopted policy guidance for data center development. The Data Center Development Policy limits where data centers can be established and regulates various aspects of their development process. The Fauquier Times has characterized it as one of the "strictest in Northern Virginia—and possibly the entire state."
February 29 Deadlines for Group Health Plans
February 29 brings two annual deadlines for employers that sponsor a group health plan for their employees.
Sharing of Addiction Treatment Records Gets Biden HHS Overhaul
After a nearly two-year delay, the U.S. Department of Health & Human Services (HHS), through the Substance Abuse and Mental Health Services Administration (SAMHSA) and the Office for Civil Rights, promulgated a Final Rule modifying the Confidentiality of Substance Use Disorder (SUD) Patient Records regulations contained within 42 CFR Part 2 (Part 2). The rule implements provisions of Section 3221 of the Coronavirus Aid, Relief, and Economic Security Act of 2020, which requires HHS to align aspects of Part 2 with the Health Insurance Portability and Accountability Act of 1996 (HIPAA) privacy rules and the Health Information Technology for Economic and Clinical Health Act (HITECH). The Final Rule reflects the proposals published in the December 2, 2022 Notice of Proposed Rulemaking (NPRM) and public comments received from a variety of stakeholders, including patient advocacy groups, trade associations, health plans, and providers. HHS took more than a year to finalize the rule after the comment period ended.
New York's LLC Transparency Act: Privacy Still Prevails
On December 23, 2024, New York Governor Kathy Hochul signed the LLC Transparency Act (LLCTA) into law, but not without a considerable compromise relative to its original form. The LLCTA was initially passed by the New York State Senate on June 6, 2023, and by the New York State Assembly on June 20, 2023, with a section that created a public business entity database on the New York Department of State (NYDOS) website. The version signed by Governor Hochul contained a chapter amendment that removed the public nature of the database, instead limiting its access to "government agencies and law enforcement." This modification brought the New York law more in line with its federal inspiration, the Corporate Transparency Act (CTA), which became effective as of January 1, 2024.
Class Voting Distinctions between Maryland and Delaware
The Supreme Court of Delaware recently issued a decision upholding long-standing precedent regarding Delaware's class vote requirement. The case, In re Fox Corporation/Snap Inc. Section 242 Litigation, concerned amendments to a corporation's certificate of incorporation that alter or change the powers, preferences or special rights of the shares of a class so as to affect them adversely. This dispute highlights one of the ways in which Maryland law provides greater flexibility than Delaware, as the Maryland General Corporation Law (the "MGCL"), contrary to the Delaware
Comparison of the Principal Provisions of the Delaware and Maryland Corporation Statutes—2023
This Comparison has been updated to include amendments to the statutes by the Delaware and Maryland legislatures in their 2023 sessions. As you will see in the Executive Summary, there are many advantages to being incorporated in Maryland, including the absence of any franchise tax (which can be as high as $250,000 in Delaware). Maryland consistently ranks high in number of New York Stock Exchange-listed companies formed under our laws.